The fund consistently under performs:
If a scheme under performs its peers consistently over a longer term, it’s a good reason to get your money out. As any mutual fund expert will tell you, the performance of a scheme is the best way to assess it. However, the scheme has shown under performance in the previous two quarters, it is not a reason to overlook that particular scheme.
Most investors and fund managers commit the mistake of comparing one fund with a fund belonging to another category. This doesn’t make any sense and will do nothing but hamper your investments in its growth.
The fund deviates from its objective:
Initially, you chose a fund because its objectives aligned with yours. But if the fund has deviated from its stated objective, either through a change in the investment mandate or otherwise, you should consider exiting it. Sometimes, fund managers, too often, take investment calls that do not match the stated objective of the scheme. It is a sign for you to consider exiting the fund. For example, a mid-cap fund may start investing in large-cap stocks or a value-oriented scheme could start chasing growth stocks. In both cases, the funds will disappoint investors by not delivering the returns they expected.
A star fund manager leaves:
Most investors believe everything to what their fund manager advises them to do. And during situations where that particular manager exits the fund house, the apprehension is aroused within such investors. Do no panic in such situations. After all its your money that needs to grow. Take time and understand how the new fund manger functions. Find out his investment style, churning frequency, stock selection, asset allocation strategy etc. If you are satisfied with his approach, then it is better if you stick to the same.
You need to re balance your portfolio:
If you feel that your financial goals for which you have assigned your investments have changed, you can rebalance and review your portfolio. If you think that you can liquidate certain assets to prepay your home loan or your personal loan, you can do so, only after considering the exit load costs and other charges that you might incur.
Your financial target has been achieved:
Once you realize you can successfully finance your requirement, you can look forward towards selling the Mutual Fund. Most financial advisors advice their clients to follow a goal linked investment approach. With this, investors will be able to allot their funds to those investments whose tenors depend on the fund requirement. Do not get too greedy. There’s no point in continuing the investment even though your objective has been achieved. You will only be exposing your investments to further risk.